To have standing in a court of law to foreclose, historically you must show two things: 1) ownership and 2) injury.

It is a very simple idea really.

First you need to show ownership. Without that why would the court hear any argument? Can BofA foreclose on your home if they don’t own the trust deed? (Well, yes it HAS happened. But that’s my point…it was wrong and they eventually had to make the homeowner whole).

Second, you have to show injury. In other words, if a trust deed holder had a $0 balance, they wouldn’t be able to foreclose because there is no injury.

With this in mind, the folks who collateralize loans ripped the trust deeds in half…they ‘sold’ the risk to investors, and kept ‘ownership’. See the problem? If you don’t, read the previous paragraph.

To get around this, the trust deed holders have been bluffing by saying a company (clearing house, really) ‘has’ proxy. Unfortunately, this argument is a canard and doesn’t hold water. MERS is a third party and has absolutely NO CLAIM at all to the property since it is just a clearing house.

With this lengthy leadin, please read this article from. The court found:

The United States Bankruptcy Court for the Eastern District of California has issued a ruling dated May 20, 2010 in the matter of In Re: Walker, Case No. 10-21656-E-11 which found that MERS could not, as a matter of law, have transferred the note to Citibank from the original lender, Bayrock Mortgage Corp. The Court’s opinion is headlined stating that MERS and Citibank are not the real parties in interest.

The opinion states: “Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law.”

The Court concluded by stating: “Since the claimant, Citibank, has not established that it is the owner of the promissory note secured by the trust deed, Citibank is unable to assert a claim for payment in this case.”

Amazing what happens when courts just judge with respect to the law. What a novel concept. Please read the whole article here.